Economics
ABC: Construction Industry to Face 'Real Risks' in 2026
Material prices have risen significantly since the COVID-19 pandemic.
Modest growth is expected in 2026, Anirban Basu, chief economist at Associated Builders and Contractors, said in a construction forecast webinar on Dec. 10. However, he said there are “real risks,” adding that “stubborn inflation [and] stubbornly high interest rates … will continue to suppress growth in construction spending.”
High inflation and interest rates are “a drag on construction activity,” said Basu. “So one of the things we’ve seen over the course of the year is that the number of construction job openings has plummeted.” In a survey, webinar participants reported insufficient demand for construction services as their leading challenge, marking the first time “in recent memory” that a lack of skilled workers had not been the leading concern, Basu said.
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Inflation and tariffs have also driven significant price increases for some materials. In the time between the start of the COVID 19 pandemic in February 2020 and September 2025, overall construction input prices have risen 43.3%, with the most substantial increase a 63.1% boost to fabricated structural metal products, according to the U.S. Bureau of Labor Statistics.
Steel mill products and nonferrous wire and cable prices also increased significantly, which Basu flagged as concerning due to the added costs to data center construction, currently one of the strongest sectors in the industry. “If these products become too expensive…. You might see the data center spending will end at some point in 2027.”
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About the same time as Basu was providing ABC's construction forecast, the Federal Reserve announced a quarter-point cut in its benchmark lending rate to approximately 3.6%.
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Total spending in non-residential construction fell 1.5% between August 2024 and August 2025, according to data from the U.S. Census Bureau. Manufacturing and commercial sectors experienced the largest downturns, at 8.2% and 7.5%, respectively, while spending in the religious construction sector rose 20.8%.
Overall, “the foundation of economic growth in America has narrowed massively over the course of this year,” said Basu. “The rich are doing great, [while] the middle class and below [are] not really making it that easily.”
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